q1 2013 market commentary - altegris/media/files/commentary/aca... · market commentary q1.2013 q1...

TRUSTED ALTERNATIVES. INTELLIGENT INVESTING.®

ALTEGRIS ACADEMYMARKET COMMENTARY

Q1.2013

Q1 2013 MARKET COMMENTARYApril 2013

The markets continued to inch toward clarity in the first quarter —while keeping a wary eye on potential tail risks.

OVERVIEW

After observing some encouraging signs in the final months of 2012, we suggested in our last market commentary that the day-to-day political drama that has largely defined the market environment in recent years could continue to recede in importance, giving trends time to develop and potentially providing more opportunities for alpha-generating strategies.

Such a scenario did largely come to pass in the first quarter of 2013.

As shown in Figure 1, equities (S&P Total Return Index) were up 10.61% in Q1, and bonds (Barclays US Aggregate Bond Index) were down -0.12%. Among alternative investment strategies, managed futures (Altegris 40 Index) were up 2.77% during the quarter, while global macro (Barclay Global Macro Index) was up 3.06%. Long/short equity (HFRI Equity Hedge [Total] Index) was up 5.29% and long/short fixed income (HFN Fixed Income [Non-Arbitrage] Index) was up 3.59%.

MARKETS TAKE ADVANTAGE OF LONG-AWAITED BREATHING ROOM

Free from the drama of economic crisis and market-moving policy response that has so often befuddled investors in recent years, underlying market action throughout the quarter was driven by the ongoing and unprecedented intervention by the US Federal Reserve Bank and the European Central Bank. Their aggressive stimulus policies set the stage for a sustained rally in global equity indices that saw prices for both the S&P 500 and Dow Jones Industrial Average ascend to pre-financial crisis highs. Global markets also began to feel the influence of

“Abenomics” in Japan, where the government and the Bank of Japan have joined the Fed and the ECB in their pump-priming efforts as part of a new policy of monetary and fiscal stimulus pushed by the country’s premier, Shinzo Abe. The announcement of that plan resulted in one of the strongest and most pervasive trends in global markets over the quarter—the rapid decline of the yen.

[2]TRUSTED ALTERNATIVES. INTELLIGENT INVESTING.®

© Copyright 2013 Altegris Advisors, LLC. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

FIGURE 1.

ALTERNATIVE INVESTMENT INDEX PERFORMANCE VERSUS TRADITIONAL INDICES | Q1 2013

Alternatives ended the first quarter of 2013 with positive performance.

Source: Altegris; Figures in italics represent first quarter estimates as of April 16, 2013. There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses.

2013 Quarterly

Return

Calendar Year Return

10-Year Return Apr 2003–Mar 2013

Q12013 YTD 2012 2011 2010 2009

Total Return

Ann ROR

Std Dev

Max DD

Altegris 40 Index 2.77% 2.77% -4.75% -3.23% 11.33% -7.98% 50.27% 4.16% 9.30% -13.24%

Barclay Global Macro Index

3.06% 3.06% 2.57% -3.65% 6.74% 7.49% 81.66% 6.15% 5.27% -6.42%

HFRI Equity Hedge (Total) Index

5.29% 5.29% 7.43% -8.38% 10.45% 24.57% 86.96% 6.46% 8.77% -30.57%

HFN Fixed Income (Non-arbitrage) Index

3.59% 3.59% 11.83% 3.90% 11.17% 22.37% 106.52% 7.52% 3.88% -14.56%

HFRI Fund Weighted Composite Index

3.87% 3.87% 6.39% -5.25% 10.25% 19.98% 96.75% 7.00% 6.48% -21.42%

S&P 500 Total Return Index

10.61% 10.61% 15.98% 2.11% 15.06% 26.46% 126.66% 8.53% 14.76% -50.95%

Barclays US Aggregate Bond Index

-0.12% -0.12% 4.23% 7.86% 6.56% 5.93% 63.37% 5.03% 3.54% -3.82%

MSCI EAFE Index (Net) 5.12% 5.12% 17.32% -12.14% 7.75% 31.78% 152.21% 9.69% 18.29% -56.68%

FTSE NAREIT Composite Total Return Index

9.10% 9.10% 19.72% 7.31% 27.55% 27.79% 203.91% 11.76% 24.38% -68.17%

S&P GSCI Total Return Index

0.56% 0.56% 0.06% -1.18% 9.02% 13.67% 26.22% 2.36% 24.20% -67.65%

888.524.9441 | www.altegris.com/mutualfunds

ALTEGRIS ACADEMY | MARKET COMMENTARY Q1.2013

[3]


2013 Quarterly

Return

Calendar Year Return

10-Year Return Apr 2003–Mar 2013

Q12013 YTD 2012 2011 2010 2009

Total Return

Ann ROR

Std Dev

Max DD

Altegris 40 Index 2.77% 2.77% -4.75% -3.23% 11.33% -7.98% 50.27% 4.16% 9.30% -13.24%

Barclay Global Macro Index

3.06% 3.06% 2.57% -3.65% 6.74% 7.49% 81.66% 6.15% 5.27% -6.42%

HFRI Equity Hedge (Total) Index

5.29% 5.29% 7.43% -8.38% 10.45% 24.57% 86.96% 6.46% 8.77% -30.57%

HFN Fixed Income (Non-arbitrage) Index

3.59% 3.59% 11.83% 3.90% 11.17% 22.37% 106.52% 7.52% 3.88% -14.56%

HFRI Fund Weighted Composite Index

3.87% 3.87% 6.39% -5.25% 10.25% 19.98% 96.75% 7.00% 6.48% -21.42%

S&P 500 Total Return Index

10.61% 10.61% 15.98% 2.11% 15.06% 26.46% 126.66% 8.53% 14.76% -50.95%

Barclays US Aggregate Bond Index

-0.12% -0.12% 4.23% 7.86% 6.56% 5.93% 63.37% 5.03% 3.54% -3.82%

MSCI EAFE Index (Net) 5.12% 5.12% 17.32% -12.14% 7.75% 31.78% 152.21% 9.69% 18.29% -56.68%

FTSE NAREIT Composite Total Return Index

9.10% 9.10% 19.72% 7.31% 27.55% 27.79% 203.91% 11.76% 24.38% -68.17%

S&P GSCI Total Return Index

0.56% 0.56% 0.06% -1.18% 9.02% 13.67% 26.22% 2.36% 24.20% -67.65%

Amid this framework of central bank support, investors began demonstrating increased confidence in global markets—or, at least, seemed less intimidated by uncertainties. Contributing to the growing momentum among stock market investors, in particular, were signs of economic recovery in the United States, including potentially real indications of improvement in the housing market and a dip in unemployment (even as the number of people leaving the workforce remains troublingly high). Meanwhile, the dominant message from the Eurozone was: No news is good news, at least with regard to the long-running sovereign debt crisis—unless, of course, you live in Cyprus.

Together, these developments brought a merciful pause to the broad risk-on/risk-off swings that have shouldered aside most other factors for the better part of two years, with a decided bias toward a risk-on environment continuing to take hold.

NOTES OF CAUTION

Even amid these improving conditions, however, questions remained. In terms of economic growth, the picture in Europe remained dim, with data releases revealing continued weakness in manufacturing and unemployment hitting a record high of 11.9% in January. Globally, commodities represented a potential cloud on an otherwise brighter horizon, as the asset class continued to exhibit choppy price action as a consequence of macro news, US dollar strengthening

and fundamental variables. Whether the commodity markets’ failure to participate in the recent risk-on rallies represents an anomaly or a canary in a coalmine remains an open question.

More generally, as the quarter came to a close it was still not clear whether improved market conditions reflect the start of a true economic recovery or simply the effects of central bank activity. In a March 2013 report, bond manager PIMCO framed current market conditions as a dichotomy between “assisted growth” and “genuine growth.” There is no doubt that stimulus-fueled assisted growth served as a primary driver of the first-quarter equity market rally. The bigger issue facing markets for the remainder of 2013 is whether that momentum can carry over into the world’s economies.

In that context, it is worth recalling that investors started off 2010, 2011 and 2012 hopeful that genuine growth was taking hold as well. In each of those years, markets got off to a strong start, only to be dragged down by a new flare-up in Europe. This year, markets are being supported by aggressive central bank stimulus policy in the United States, Europe and Japan, and ECB bond-buying has helped keep the lid on the European sovereign debt crisis. Yet risks remain.

Against this backdrop, following is a detailed assessment of long/short equity, long/short fixed income, managed futures and global macro strategies for the first quarter of 2013.



FIGURE 2.

S&P 500 FUTURES | Jan 2011 – March 2013

The uptrend in equities that began in late Q4 2012 continued during the first quarter.

SOURCE: Altegris, Bloomberg.

1,000

1,100

1,200

1,300

1,400

1,500

1,600

S&P

500

Futu

res

Jan-11 Jan-13Jan-12Apr-11 Jul-11 Oct-11 Apr-12 Jul-12 Oct-12

Q1S&P 500 Futures200 Day Moving Average50 Day Moving Average

Long/Short Equity Strategy Summary

The reduced uncertainty as a result of central bank action and fiscal cliff aversion has led to a perceived revaluation in the equity markets. It appears that investors have realized the relative attractiveness of equities versus bonds, which has led to the largest inflow to equity mutual funds that we have seen since 2007, according to the Investment Company Institute. Corporate balance sheets also remained strong throughout the quarter, as they have been for some time. US firms alone continued to add to a cash

stockpile that reached some $1.45 trillion as of the start of 2013, according to Moody’s. Those massive cash holdings began more directly impacting stock valuations, with a spate of corporate stock buybacks over the quarter—which also contributed to increased investor confidence.

This combination of factors made equities the market’s best-performing asset class in Q1, as shown in Figures 2 and 3 below.

FIGURE 3.

NIKKEI FUTURES PRICE | Jan 2011 – March 2013

New Japanese government policies led to wide-spread buying in Q1 2013.


7,000

8,000

9,000

10,000

11,000

12,000

13,000

Nik

kei F

utur

es


Q1Nikkei Futures Price200 Day Moving Average50 Day Moving Average



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Long/short equity strategies captured an estimated 50-60% of overall stock market gains during the quarter, as many managers maintained their relatively low beta exposures. Over the course of the three-month period, however, exposures increased across all regions. The biggest increase in net exposures took place in Asia, driven primarily by the Japanese market, which experienced widespread buying with the implementation of pro-growth policies by the new Abe government and the Bank of Japan.1

While global equity markets have certainly rallied, conditions in recent months have appeared to be growing progressively more favorable to long/short strategies specifically. In Q4 2012, declining correlations among S&P 500 constituents started creating an improved environment for skilled stock

pickers. As illustrated in Figure 4 below, long/short strategies have delivered more alpha and better risk-adjusted returns during periods in which “stock-specific risk levels” are increasing vs. timeframes in which they are decreasing. Such conditions have historically been ripe for long/short equity strategies because they can provide managers with more opportunities to generate alpha and incremental returns through the shrewd selection of long positions in undervalued stocks and short positions in overvalued stocks, while seeking to provide a measure of downside protection against unforeseen events. In fact, by quarter’s end, stock-specific risk stood at its highest level in five years, reflecting a sharp increase since July 2012. We believe that skilled stock-pickers with the flexibility to go both long and short should be well positioned if such an environment endures.

FIGURE 4.

Periods of increasing “stock-specific risk” have historically created opportunities for long/short equity strategies to deliver alpha.

SOURCES: FactSet, Morgan Stanley Research

The monthly information ratio measures a portfolio manager’s ability to generate excess returns relative to a benchmark, but also attempts to identify the consistency of the investor.

Past performance is no guarantee of future results.

HEDGE FUND INDEX PERFORMANCE UNDER CHANGES IN STOCK-SPECIFIC RISK

Monthly Alpha | Jan 1993 – Dec 2012

HEDGE FUND INDEX-RISK ADJUSTED PERFORMANCE UNDER CHANGES IN STOCK-SPECIFIC RISK

Monthly Information Ratio | Jan 1993 – Dec 2012

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

Decreasing Specific Risk Increasing Specific Risk

HFRI EH Residual

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

Decreasing Specific Risk Increasing Specific Risk

HFRI EH Index

1. Sources: Morgan Stanley Prime Brokerage, UBS



Long/Short Fixed Income Strategy Summary

While 2012 was a banner year for long-biased fixed income strategies, market participants were understandably less optimistic heading into 2013. Despite the continued commitment of major central banks to promote and maintain economic growth, investors began to question the perceived safety of fixed income assets, particularly low-yielding developed market government bonds. This caution was justified, and developed market interest rates generally rose throughout Q1 as investors began to price in expectations for growth in the coming years.

In fact, the preeminent theme across global fixed income markets was the risk—or, rather, the ultimate certainty—of rising interest rates at some point in the future.

As illustrated in Figure 5 below, domestic fixed income showed signs of reaching a plateau in Q1, with the potential for rising rates (and declining sovereign bond prices) becoming more and more likely. Yield on 10-year US Treasuries climbed from 1.75% to 1.95% over the course of the quarter.

FIGURE 5.

10-YEAR US TREASURY FUTURES | Jan 2011 – Mar 2013

Domestic fixed income showed signs of reaching a plateau in Q1.


115

120

125

130

135

140

Valu

e of

Par


Q110 Year US Treasury Price200 Day Moving Average50 Day Moving Average



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Credit-sensitive assets, on the other hand, extended their rally (although at a much slower pace than in 2012), and led to positive performance for most fixed income sectors during the quarter. Long/short fixed income strategies, particularly those with heavier exposures to higher-yielding credit, generated modestly positive performance in Q1. While Treasuries sold off, credit spreads continued to grind tighter as economic data was generally positive and investors maintained their appetite for yield. High-yield corporate bonds and non-agency mortgage-backed securities were two of the strongest-performing sectors, as their lower relative duration and steady income generation more than offset the headwind of rising interest rates.

Lower-yielding assets—including investment grade corporate credit, government bonds, and agency mortgages—produced near-zero returns during Q1,

with longer-duration bonds underperforming shorter-duration issues. International bond performance was highly dependent upon regional and currency exposures, as US dollar-denominated bonds significantly outperformed their local counterparts due to the strong US dollar rally in Q1.

While 2012 performance was dominated by the long side, most credit assets, in our view, were priced at or very close to fair value as Q1 2013 came to a close. In an environment in which credit is no longer

“cheap,” and the risk of rising interest rates is more palpable than just several months ago, it is becoming increasingly difficult to rely on beta for returns. As a result, managers with the flexibility to potentially generate alpha from both short and long positions could enjoy a significant advantage over their long-only counterparts in the months to come.



Managed Futures Strategy Summary

For much of the last few years, managers endured stretches in which the lack of sustained market trends resulted in some of the worst conditions in memory for managed futures strategies. All trend-following managers needed was the emergence of just a few sustainable trending markets, allowing them to build greater positions as trends further strengthened—but with the exception of interest rate markets, there were essentially no established trends for managers to capitalize upon. At an aggregate level, managed futures managers had been long interest rate futures for an extended period. In fact, these positions represented one of the biggest sources of positive attribution for these managers in 2012.

But with markets less contingent upon the cycle of frequent and unprecedented swings between risk-on and risk-off market environments, managed futures

managers found opportunities to pursue a growing number of trends as they developed and persisted in Q1. While the interest rate trend largely came to an end, newer trends continued their persistence and some new trends emerged, most notably long stock index positions in the midst of a stimulus-fueled equity rally, and short positions in the yen and the British pound.

Interestingly, commodities represented a source of negative attribution for many managed futures managers. While encouraging economic developments helped stoke the strong Q1 rally in equities, commodities prices failed to respond in kind. In fact, all commodities sectors turned negative amid choppy price action in February. As illustrated in Figure 6 below, the Dow Jones-UBS Commodity Index was down -1.1% for the quarter, while gold and wheat were down significantly more: approximately -4.8% and -11.6%, respectively.

FIGURE 6.

COMMODITY PRICE MOVEMENT | Price Movement % Q1 2013

February proved volatile, as all commodity sectors were down for the month.


-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

Dow Jones-UBSCommodity Index 1.1%

Gold 4.8%

Wheat 11.6%

March-13Jan-13 Feb-13

February



[9]


These types of moves would appear out of step with the beginnings of a durable economic recovery, since commodity markets typically rally amid a shift to a risk-on environment. As a consequence, many managed futures managers held low levels of exposure to the sector during the first quarter.

The past few years—particularly 2012—were difficult for managed futures. That period was essentially a “perfect storm” for the space—based among other things on the dearth of trends and whipsawing between risk-on and

risk-off market environments. Yet, the damage has been minimal in our view. The strategy’s worst drawdown was -15% from December 1991 through April 1992. To put that into context, the worst peak-to-trough period for the S&P 500 TR Index produced a negative return of -50.95% from October of 2007 through February of 2009. With recent past performance showing moderate gains, although past performance is no guarantee of future results, we are hopeful that we are seeing the beginning of a positive change in the environment for managed futures investing.



Global Macro Strategy Summary

Similar to their managed futures peers, the improved performance for a number of macro managers in Q1 2013 can be attributed in part to an overall upturn in macro-economic conditions, as the Eurozone crisis receded, the US economic recovery showed signs of traction and policy actions generally gave way as the primary driver of investor sentiment and market direction.

Having transitioned to a “long economy” position in the second half of 2012, many macro managers generated significant profits from the rally in global equity markets throughout Q1. The strong downward trend in the yen also provided opportunities for macro managers to generate positive performance during the quarter. Those gains were moderated somewhat by the drop in commodity prices, currency reversals and reduced volatility in equities.2

Despite the general improvement in market conditions, by the end of March it became clear that not all

macro managers were convinced that they were witnessing a real economic recovery. In fact, some managers worried that the equity market rally and other positive signals were a product not of a sustainable recovery, but of the flood of central bank stimulus. To that end, managers expressed concern about the fact that the rally in equities was not carrying over into other risk assets.

In a letter to investors published in March, leading global macro manager Brevan Howard warned that tail risks have by no means disappeared. “Having faith in policymakers’ ability to provide a perpetual put may yet prove to be a serious error; and, with interest rates stuck at zero, investors’ ability to easily earn back losses remains seriously impaired,” the report read. Thus, some managers have stayed on the sidelines, unsure of whether the current stimulus fueled rally in risk assets (with the exception of commodities) would continue.

2. Source: HFRI Monthly Indices Performance, March 2013



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Conclusion

There is no denying that the past few years were difficult for a number of alternative investment strategies. However, after an extended period in which the markets were often clouded by the whims of politicians, the early months of 2013 continued a move that began late last year in which the macro-economic picture finally started coming into focus. That picture has been defined mainly by the aggressive stimulus policies pursued by central banks around the world, and by an improving economic picture in the United States. These two factors helped build investor confidence in the idea of a potential recovery, and pushed equity markets to record highs.

With the sweeping risk-on/risk-off moves that have dominated market action for the past two years appearing to recede, price trends have begun to strengthen while the macro-economic landscape has been less influenced by policy drama. These shifts augur well for managed futures and global macro

strategies. They also represent positive developments for long/short equity and fixed income managers, since individual company fundamentals should be able to shine through and potentially create more opportunities for managers to differentiate themselves from the broad market indices.

At the same time, while markets enter Q2 2013 with a renewed sense of optimism, it remains to be seen whether improving conditions reflect a long-awaited sustainable recovery or are primarily the consequences of the current, unprecedented period of loose monetary policy. In this context, we remain firm in our conviction that the flexible, opportunistic approaches of long/short equity and fixed income, managed futures and global macro can generate alpha while also seeking to mitigate tail risk, and should serve an important role in in providing potential non-correlated returns to investors’ portfolios for years to come.

ABOUT RISK

Alternative investment strategies that utilize managed futures, global macro, long/short equity and long/short fixed income strategies are subject to risks such as market risk, commodity risk, potential loss due to adverse weather and geological conditions or regulatory and political developments. Other risks include concentration risk, derivatives risk, foreign investment risk, foreign currency risk, emerging market risk, higher expenses, liquidity risk, interest rate risk, credit risk and significant use of leverage risk which can magnify gains or losses.



INDEX DESCRIPTIONS

An investor cannot invest directly in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented.

Commodities. The S&P GSCI Total Return Index measures a fully collateralized commodity futures investment. Currently the S&P GSCI includes 24 commodity nearby futures contracts.

Global Macro. The Barclay Global Macro Index track the performance of ~175 global macro programs, by ending monthly values, net of fees, as reported to Barclay Hedge.

Hedge Funds. The HFRI Fund Weighted Composite Index is an equal-weighted return of all funds in the HFR Monthly Indices, excluding HFRI Fund of Funds Index.

International Stocks. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

Long/Short Equity. The HFRI Equity Hedge (Total) Index tracks funds that maintain positions both long and short in primarily equity de-rivative securities. Equity hedge managers would typically maintain at least 50% exposure, and may in some cases be entirely invested in, equities — both long and short. HFRI Equity Hedge (Total) is a fund weighted index and reflects monthly returns, net of all fees, of funds that have at least $50 million under management or been actively trading for at least twelve months.

Long/Short Fixed Income. The HFN Fixed Income (non-arbitrage) Index includes funds that are invested in fixed income instruments and tend to be long-biased holders of securities. Funds may employ long/short strategies attempting to benefit from under or overval-ued fixed income securities. These funds may be highly leveraged. The Index uses equal weighted averages of monthly returns funds reported by US and international investment managers and are grouped together based on primary strategy classifications contained in the HedgeFund.net database

Managed Futures. The Altegris 40 Index® tracks the performance of the 40 leading managed futures programs, by ending monthly equity (assets) for the previous month, as reported to Altegris by the over 500 managed futures programs that report performance to Altegris’ proprietary database. The Altegris 40 index represents the dollar-weighted average performance of those 40 constituent pro-grams. The index started in July 2000; data is available back to 1990.



[13]


REITs. The FTSE NAREIT® Composite Total Return Index includes both price and income returns of all publicly traded REITs (equity, mortgage, and hybrid).

US Bonds. The Barclays Capital US Aggregate Bond Index covers the US Investment grade fixed rate bond market representing taxable US dollar securities.

US Stocks. The S&P 500 Total Return Index is the total return version of S&P 500 index. The S&P 500 index is unmanaged and is gener-ally representative of certain portions of the US equity markets. For the S&P 500 Total Return Index, dividends are reinvested on a daily basis and the base date for the index is January 4, 1988. All regular cash dividends are assumed reinvested in the S&P 500 index on the ex-date. Special cash dividends trigger a price adjustment in the price return index.



IMPORTANT RISK DISCLOSURE

Hedge funds, commodity pools and other alternative investments involve a high degree of risk and can be illiquid due to restrictions on transfer and lack of a secondary trading market. They can be highly leveraged, speculative and volatile, and an investor could lose all or a substantial amount of an investment. Alternative investments may lack transparency as to share price, valuation and portfolio holdings. Complex tax structures often result in delayed tax reporting. Compared to mutual funds, hedge funds and commodity pools are subject to less regulation and often charge higher fees. Alternative investment managers typically exercise broad investment discretion and may apply similar strategies across multiple investment vehicles, resulting in less diversification. Trading may occur outside the United States which may pose greater risks than trading on US exchanges and in US markets. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

There are substantial risks and conflicts of interests associated with managed futures and commodities accounts, and you should only invest risk capital. Mutual funds involve risk, including the possible loss of principal.

ALTEGRIS ADVISORS

Altegris Advisors, LLC is an SEC-registered investment adviser that advises alternative strategy mutual funds that may pursue investment returns through a combination of managed futures, equities, fixed income and/or other investment strategies.

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888.524.9441www.altegris.com/mutualfundsPrinted April 2013496409_042413

ALTEGRIS ADVISORS

ABOUT ALTEGRIS

Altegris searches the world to find what we believe are the best alternative investments. Our suite of private funds, actively managed mutual funds and futures managed accounts provides an efficient solution for financial professionals and individuals seeking to improve portfolio diversification.

With one of the leading Research and Investment Groups focused solely on alternatives, Altegris follows a disciplined process for identifying, evaluating, selecting and monitoring investment talent across a spectrum of alternative strategies including managed futures, global macro, long/short equity, event-driven and others.

Veteran experts in the art and science of alternatives, Altegris guides investors through the complex and often opaque universe of alternative investing.

Alternatives are in our DNA. Our very name, Altegris, highlights our singular focus on alternatives, the highest standards of integrity, and a process that constantly seeks to minimize investor risk while maximizing potential returns.

The Altegris Companies, wholly owned subsidiaries of Genworth Financial, Inc., include Altegris Investments, Altegris Advisors, Altegris Funds, and Altegris Clearing Solutions. Altegris currently has approximately $3.32 billion in client assets, and provides clearing services to $878 million in institutional client assets.*

* Altegris and its affiliates are subsidiaries of Genworth Financial, Inc. and are affiliated with Genworth Financial Wealth Management, Inc., and include: (1) Altegris Advisors, LLC, an SEC registered investment adviser, CFTC-registered commodity pool operator, commodity trading advisor, and NFA member; (2) Altegris Investments, Inc., an SEC-registered broker-dealer and FINRA member; (3) Altegris Portfolio Management, Inc. (dba Altegris Funds), a CFTC-registered commodity pool operator, NFA member and SEC-registered investment adviser; and (4) Altegris Clearing Solutions, LLC, a CFTC-registered futures introducing broker and commodity trading advisor and NFA member. The Altegris Companies and their affiliates have a financial interest in the products they sponsor, advise and/or recommend, as applicable. Depending on the investment, the Altegris Companies and their affiliates and employees may receive sales commissions, a portion of management or incentive fees, investment advisory fees, 12b-1 fees or similar payment for distribution, a portion of commodity futures trading commissions, margin interest and other futures-related charges, fee revenue, and/or advisory consulting fees.

Genworth Financial, Inc. (NYSE: GNW) is a leading Fortune 500 insurance holding company dedicated to helping people secure their financial lives, families and futures. Genworth has leadership positions in offerings that assist consumers in protecting themselves, investing for the future and planning for retirement

— including life insurance, long term care insurance, financial protection coverages, and independent advisor-based wealth management — and mortgage insurance that helps consumers achieve home ownership while assisting lenders in managing their risk and capital.

Genworth has approximately 6,300 employees and operates through three divisions: U.S. Life Insurance, which includes life insurance, long term care insurance and fixed annuities; Global Mortgage Insurance, containing U.S. Mortgage Insurance and International Mortgage Insurance segments; and the Corporate and Other division, which includes the International Protection, Wealth Management and Runoff segments. Products and services are offered through financial intermediaries, advisors, independent distributors and sales specialists. Genworth Financial, Inc., headquartered in Richmond, Virginia, traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com. From time to time, Genworth Financial, Inc. releases important information via postings on its corporate website. Accordingly, investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information is found under the “Investors” section of genworth.com.

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